Introduction
In the dynamic world of real estate investment, finding the right financing solution is often the key to success. Private commercial real estate lenders have emerged as crucial players in this space, offering unique advantages for investors. In this blog, we’ll delve into the world of private commercial real estate lenders, exploring what sets them apart and how they can make your real estate dreams a reality.
What Are Private Commercial Real Estate Lenders?
Private commercial real estate lenders, often referred to as commercial lenders, are financial institutions or individuals that provide funding for commercial real estate ventures. They differ from traditional banks in their flexibility, speed, and expertise in the real estate sector.
Best Lenders of Choice for Commercial Property in 2023
In 2023, several private commercial lenders stand out for their reliability and investor-friendly services:
1. Enterprise America Inc
Amidst the dynamic landscape of real estate investment, the right financing solution is the linchpin for success. Enter Enterprise America Inc., a stalwart in commercial lending boasting over 25 years of expertise. As we navigate the top private commercial real estate lenders of 2023, Enterprise America Inc. takes center stage as a key player, committed to being more than a mere financial institution – we are your dedicated partner on the path to achieving your business goals.
At the helm of Enterprise America Inc. is a leadership team dedicated to excellence. Our legacy is defined by the pride we take in assisting numerous businesses across diverse industries in realizing their dreams. Whether you are a startup, an established enterprise, or find yourself somewhere in between, Enterprise America Inc. brings unparalleled expertise and resources to fuel your success.
In the journey of real estate financing, consider Enterprise America Inc. as your strategic ally. We are committed to transforming your real estate aspirations into tangible achievements, offering more than just loans – we offer a partnership dedicated to your business’s triumph.
2. iBorrow
Los Angeles-based iBorrow is a highly experienced commercial lending firm with a substantial track record, having funded more than $1.5 billion in loans over the last few years. What sets iBorrow apart is its focus on providing commercial bridge loans in amounts ranging from $3 million to $100 million or more.
iBorrow is known for its agility and efficiency in the lending process, often closing loans in as little as two weeks. This speed is particularly valuable in the competitive real estate market. They streamline the application process for borrowers, reducing paperwork and offering pre-approved Letters of Intent (LOIs).
One of the significant advantages of iBorrow is its flexibility in terms of property types. They fund various commercial property types, including multifamily, hospitality, industrial, self-storage, and office assets. Moreover, iBorrow caters to value-added and opportunistic property acquisitions, owner-occupied commercial properties, and even loans for borrowers with pending litigation.
The company is currently led by CEO Brian Good, who contributes to iBorrow’s reputation for excellence and efficiency in commercial real estate lending.
3. GoKapital
Based in Miami, Florida, GoKapital focuses on providing loans for both commercial real estate and residential investment properties, as well as financing for small businesses. Their core commercial real estate loan program is incredibly flexible, offering loan amounts from $150,000 to $50 million and terms spanning from 1 to 30 years.
What makes GoKapital stand out is its diverse interest rate options. They offer both fixed and adjustable-rate interest options, catering to the preferences of different borrowers. Additionally, they claim to accept all credit scores, making financing accessible to a broader range of borrowers.
The key advantage of GoKapital is its quick underwriting process and fast approvals, allowing borrowers to seize investment opportunities promptly.
GoKapital’s commercial bridge loan program is somewhat similar, offering loan amounts between $100,000 to $50 million, generally closing within 2-4 weeks. However, their bridge loan program has much shorter terms, usually between 6-24 months, offers lower leverage (between 50% to 70%), and does require a credit check, although a poor credit score does not automatically mean that a loan application will be denied.
Like Private Capital Investors, GoKapital also offers foreign national loans for commercial properties, expanding its reach to international investors. The company is currently led by Co-Founder and CEO Christian Moreno, contributing to GoKapital’s growth and reputation in the lending industry.
4. Tidal Loans
Tidal Loans, headquartered in Houston, Texas, is a private commercial lender that provides a wide array of financial products to real estate investors. Their main focus is on loans for rehabbing multifamily properties, making them particularly attractive to investors involved in multifamily real estate.
Tidal Loans offers a popular multifamily loan program that concentrates on smaller apartment buildings. They provide loans ranging from $500,000 to $20 million with an 85% LTC (Loan-to-Cost) and 70% ARV (After Repair Value). Loan terms extend between 12-24 months, offering investors flexibility in their investment strategies.
For non-multifamily commercial properties, Tidal Loans provides commercial bridge loans and commercial rehab loans with up to 65% LTV (Loan-to-Value). They also offer long-term, 30-year, fully-amortizing commercial loans up to 70% LTV and 80% CLTV (Combined Loan-to-Value). One standout feature of Tidal Loans is that all loans they offer are non-recourse, reducing the personal liability of borrowers.
The unique focus on multifamily and non-recourse lending sets Tidal Loans apart in the private commercial lending landscape.
5. Integra Real Estate Capital
Integra Real Estate Capital, based in New York City, operates as a commercial mortgage broker rather than a direct lender. However, it has deep relationships with a variety of private commercial lenders, making it a valuable resource for borrowers seeking financing.
Integra’s popular commercial bridge loan program offers financing with an LTC (Loan-to-Cost) of up to 85% and is available for multifamily properties, shopping centers, industrial and warehouse properties, hotel and hospitality properties, and office buildings. Most of these loans have an initial duration of between 12 and 36 months, with the option to renew beyond that.
DSCRs (Debt Service Coverage Ratios) generally need to be above 1.00x, although exceptions can be made for properties with exceptionally strong business plans. Integra excels at financing deals in a variety of scenarios, including refinancing construction loans, purchasing foreclosed properties, and providing commercial property loans for foreign nationals.
What sets Integra apart from many of the lenders on this list is that most of the bridge loans offered by its network of lenders are fully non-recourse. This means that the lender cannot attempt to go after a borrower’s assets should they default on their loan.
Integra Real Estate Capital is currently led by Managing Partner Russell Kimyagarov, contributing to the company’s role as a valuable intermediary between borrowers and private commercial lenders.
6. RainStar Capital Group
RainStar Capital Group is the most flexible private equity real estate lender. A range from $100,000 to $10 billion is available from the company. Similar to Integra Real Estate Capital, RainStar is primarily a commercial loan agency that claims to have access to over 250 reputable national commercial real estate lenders. Rainstar Development Capital, their direct private lending arm, specializes in financing residential developments across the United States, including condominium towers, senior and student housing communities, and multi-family and mixed-use developments.
In addition to commercial real estate financing, Rainstar also offers business lending, merchant cash advances, invoice financing, asset-based lending, and equipment financing services to a wide array of clients. Kurt Nederveld serves as CEO of Rainstar Capital Group at present.
Traditional commercial real estate, manufacturing companies, hotels and casinos, oil and gas industries, electrical power plants, shipping yards, transportation and logistics facilities, and natural resources-based real estate are all eligible for financing from CSG. Jacob Cherner is the current president of CSG Investments.
Benefits of Private Commercial Lenders
Private commercial lenders offer a range of benefits that make them an attractive choice for real estate investors:
Flexibility: Unlike traditional lenders with rigid guidelines, private lenders are more flexible. They don’t impose stringent net worth or credit score requirements, allowing a wider range of investors to access financing.
Diverse Property Types: While some traditional lenders limit their support to specific property types, private commercial lenders often fund a broader spectrum of assets, from multifamily and hospitality to industrial and office properties.
Quick Financing: Private lenders can expedite the lending process, allowing borrowers to seize time-sensitive opportunities. Their ability to close loans in a matter of weeks can be a game-changer.
Filling the Gap: In today’s challenging lending environment, banks and credit unions are increasingly hesitant to fund commercial construction and bridge loans, especially for unique or distressed properties. Private commercial lenders step in to fill this crucial gap.
Private Commercial Lenders: Diverse Ecosystem
Private commercial lenders are not a one-size-fits-all category. They encompass a diverse ecosystem, catering to different niches within the real estate market:
Small to Mid-Size Hard Money Lenders: Some private commercial lenders are small to mid-size hard money lenders, primarily financing commercial properties.
Middle-Market Commercial Bridge Lenders: Others specialize in middle-market commercial bridge loans, offering support for property acquisitions and renovations.
Institutional Backing: Some private lenders operate as fully-fledged institutions backed by real estate debt funds or private equity firms. These well-funded entities can finance even larger projects.
In Conclusion:
As you can see, private commercial lenders come in many shapes and sizes, from one-person startups to multibillion-dollar banks. Bridge loans for rigorous rehabilitation, value-add scenarios, and new construction financing may be the specialty of some lenders while others will only fund stabilized assets in key markets.
When searching for a private lender, there are many factors to take into mind. Some examples of this are:
- Status of the Lender
- Borrowing Costs
- Maximum LTV/LTC and Minimum DSCR
- Amortization schedules for loans
- Beginning Costs
- Fees for early payments
- The Recourse Clause of a Loan
- Extensions of Loans
- Prerequisites for Credit
Repurposed for other purposes beyond the original loan (such as renovation or value-addition)
There may be other options available besides going out and finding a lender on your own. In many cases, it can be helpful to speak with a commercial mortgage broker who can help you find the ideal lender. Commercial loan brokers, in comparison to individual investors, have access to a larger pool of potential lenders, and a good broker may be able to negotiate on your behalf to lower interest rates and origination fees, extend loan terms and amortizations, and even modify a loan’s recourse provisions to mitigate legal risk.
Frequently Asked Questions:
Identifying the single “biggest” commercial real estate lender can be challenging because there are numerous significant players in the commercial lending industry. However, some of the largest and most influential commercial real estate lenders in the United States include Wells Fargo, JPMorgan Chase, and Bank of America. These major banks offer a wide range of commercial real estate financing options and serve a vast client base.
One prominent example of a commercial lender is Wells Fargo. Wells Fargo is a major financial institution that provides a comprehensive suite of commercial lending services, including commercial real estate loans, construction loans, and more. They work with businesses of all sizes, from small enterprises to large corporations, to fulfill their financing needs. Commercial lenders like Wells Fargo help companies secure the capital required to purchase, expand, or develop commercial properties.
A commercial lender is a financial institution or entity that specializes in providing loans and financing to businesses and commercial real estate ventures. These lenders offer various types of loans, such as commercial real estate loans, construction loans, equipment financing, and working capital loans, to assist businesses in achieving their financial objectives. Commercial lenders evaluate the creditworthiness and financial stability of borrowers before extending loans and may offer a range of terms and conditions tailored to meet the specific needs of each business.
The best bank for a commercial property loan can vary depending on your specific requirements and location. Some well-regarded banks for commercial property loans in the United States include Wells Fargo, JPMorgan Chase, Bank of America, and U.S. Bank. However, the “best” bank for your commercial property loan depends on factors like the type of property, loan amount, terms, interest rates, and your creditworthiness. It’s advisable to shop around, compare offers, and consult with multiple lenders to find the most suitable commercial property loan for your unique situation. Additionally, working with a local or regional bank can sometimes offer advantages in terms of personalized service and knowledge of the local real estate market.
There is a wide variety between the types of assets funded by private commercial real estate lenders. The vast majority of lenders will provide financing for traditional properties including apartments, hotels, shopping centers, offices, dorms, and warehouses. Owner-occupied commercial properties and unusual properties like oil and gas fields, casinos, factories, farms, and other high-risk assets may be eligible for funding from specialized lenders.
How much of a loan-to-value (LTV) do private commercial lenders offer?
Varying private commercial lenders have varying maximum loan-to-value (LTV) ratios they will finance. The typical LTV offered by private lenders is 70–85%. At times, the maximum loan-to-cost (LTC) for construction loans and commercial rehab loans (often structured as bridge loans) might reach 90%.
